The Bank of Japan (BOJ) has taken a significant step towards normalizing its monetary policy by raising its short-term interest rate to 0.25% and announcing plans to gradually reduce its bond-buying program. This decision, made unanimously at the end of a two-day policy meeting, marks a shift from the bank’s long-standing ultra-loose monetary policy.

The BOJ plans to halve its monthly bond purchases to 3 trillion yen by early 2026, signaling a move towards quantitative tightening. While this move is seen as more aggressive than expected, some analysts suggest it may not be enough to significantly strengthen the yen, especially in light of potential Federal Reserve decisions.